"Skip, I know home prices and interest rates are at all-time lows, and we've looked at a lot of homes and this last one was the best one yet! But I'm thinking we should take a couple of days to think about it before we make an offer. What do you think?"
Ok, I'm with you--don't jump into something to quickly and allow a snap decision to get you into trouble. Let's take a step back and look at this with the big picture in mind. If you are looking at homes and have taken the time to get a pre-approval lettter from your lender, you've already given a lot of thought to this idea of buying a home, right? Most likely you have spent nights thinking about this and have decided, "This is it, we are going to do it!" So tell me what is going to happen if tomorrow morning you lose this home to someone who was ready to make the decision--you know, "pull the trigger"?
"But Skip, buddy, this home has been on the market for three months and no one has snapped it up yet. I think I have a couple of days, really, what is the rush?"
Well, I realize it has been on the market for a while, but in that time there have been other people looking. If they are like you, they wanted some time to think about it, and they may be ready to put their offer in. Plus as you stated, you have seen the other homes in the area that compare to this one, and it is the one that is the best value in a grerat location. If you have come to that conclusion, so have three other couples!
My best advice? If you have thought this through and you are ready to buy a home, you have done your homework, you know a good deal when you see one. . . go ahead make the offer!
Skip what is a short sale? It is a process where a lender agrees to take less money for a mortgage than is actually owed. In other words, let's say a homeowner owes $100,000 on their home, and for some legitimate reason, (job loss, health or under employment) they are unable to make their house payment. On top of that, because of the reduction in home values over the past few years, the home on the open market is only worth $85,000. The bank will sometimes agree to take less than is owed by the current homeowner to keep from having to go through the foreclosure process. Let's see if this video makes it more clear.
"Ok, so I understand what a short sale is, but what does that mean to me?"
Let's start with our sellers out there who are unable to make their payments, or are maybe very close to that point. Well, if you are the homeowner who is faced with inability to pay your mortgage, then keep in mind...there is hope. You just need to get some good advice and move forward, so as to avoid a foreclosure. Don't wait. Time is not on your side. You need to sit down with an agent, or a real estate attorney, so you can make the best desision.
"Well, Skip, I am not having a problem making my mortgage, and I owe less than my home is worth, so this doesn't affect me, right?" Wrong! If a home in your neighborhood is sold as a short sale or a foreclosure, your value WILL be affected. This means less money in your pocket when you decide to sell. If you don't plan on selling, and you purchased your home more than five years ago, then I have to agree--you are only losing money on paper, and hey, your tax bill will just look better.
"Hey wait, Skip, I am a buyer on the market, and I have noticed there are a lot of short sales on the market. They seem to be priced really good." Just keep in mind that a large percentage of these homes have not been approved by the lender. Let's insert an example here to clear this up a bit. Let's go back to our example, the seller has a home that they owe $100,000 and it will only appraise for $85,000. Now let's just say our sellers have put this home on the market and they are asking $86,500 for it, and you go look at it and fall in love...it is the best home you have seen in your price range, so you make an offer for $85,000. The sellers sign the offer, and the sellers' agent sends it off to the bank for their approval. Much to your disapointment, a few weeks later the bank has countered your offer at $89,300. "Skip....What?...they were only asking $86,500 to begin with!" Ahh, yes...the SELLERS were only asking the $86,500, but they had not yet received the approval from their lender, so the lender is now in the driver's seat and they have countered your offer. "Wait, Skip, you said the home would only appraise for $85,000." Yes, and you can still counter the offer the bank sent to you and include a Current Market Analsis, or CMA, along with your offer to get them to reconsider your offer. This will sometimes work as long as you don't need to get into a home in the next 30 or 45 days. The process will usually take a couple of months from start to finish, then add on the usual 30 or so days to close. Also, keep in mind there are some short sales that are much longer. You can stipulate in your purchase contract you are only going to give the lender a specific time frame to close, and if it goes any longer you will be released from you obligation to purchase. Let's insert a video to illistrate my point.
"So, should or shouldn't I buy a short sale home?" The answer is yes...no...well, maybe! Talk to a Realtor, and they can give you the best advice that will fit your unique situation.
I am conststantly being reminded how entailed the process is that we call real estate. Whether buying, selling, renting or flipping we call it all "real estate". Is this really enough to just call it real estate? That is like just calling all the candy in the gas station...well...just candy bars! You know what I mean, what if you were walking down the candy aisle and all the packages just said the same thing? Think about the advertising that goes behind each type of candy bar. Twix...Two for me none for you; M&Ms...Melts in your mouth not in your hands, & Reese’s Peanut Butter Cups...You got chocolate in my peanut butter! I really think we could get a little more original here in real estate too! How about for buying a duplex we use the twix slogan...Two for me none for you, or if the buyers want a home that is not in a neighborhood we use the Butterfinger slogan...Break out of the ordinary. If you are selling, and have been on the market for a while, the slogan for a Tootsie Pop...How many licks does it take to get to the Tootsie Roll Center of a Tootsie Pop? The world may never know. Or if the seller gets a really low offer you can use the Kit-Kat...Gimme a break. Let's move over to the renters who are not ready to buy yet they can use the 3 Musketeers...A lighter way to enjoy chocolate. Even better yet, how about our investors who bought at the high in the market using the Whatchamacallit. It’s more than a mouthful! Or how about the investor who is really anxious to buy their next investment using Snickers slogan...Hungry? Why wait? Ok, ok, I'm done but I am sticking to my guns--we are way to boring in our verbiage! I know we Realtors could use the Mounds and Almond Joy slogan....Sometimes you feel like a nut. Sometimes you don’t!
Home of your dreams is the 5 bedroom 4 bath home on the lake you picture yourself in when you close your eyes and see the perfect Christmas. Mmm the smell of fresh baked cookies! The stepping stone home is the 2 bedroom 2 bath home in town that is a little less than perfect. Aah the fresh smell of paint!
As I look at homes with first time home buyers I find that usually the expectation is set at the home of our dreams.
Let's meet these first time home buyers...I usually find they are a young couple who have a child and are thinking they will be having more. They may even be thinking mom may be staying home to raise the children. As they drive up, our young first time home buyers get out of a three month old minivan, still equipped with that "new car" smell. Our young couple tells me they are looking at some where around the 2000 square foot range and they will have to have four bedrooms with a big back yard.
Keep in mind real estate is usually the largest investments you will ever make, so planning and consulting is a great move before you purchase. In our example above we find that this young couple is "ready" to take the next big step...buy a home! As I step back and look I can see we need to asses our goals and sharpen our view to keep the final goal in mind..."The dream home". Every long journey starts with a step and sometimes there are a lot of steps on our journey. Here is where there seems to come disappointment in the eyes of our young couple, though there need not be. They find they need to back down to that 2 bed 2 bath home and make it a stepping stone on the road to that dream house on the lake. A few points we mentioned earlier, they really want to have mom stay home and raise the kiddos so there may soon be a loss of income, getting into a big mortgage is very likely to kill that dream. They have also already obligated themselves to a "new car smell" payment. This in and of itself my not be a bad thing but you must keep your dept to income ratio in check, ie enough money at the end of the month to meet your obligations and still have money for the grocery store.
So Skip what are you saying they can't have their dream home? No, not at all...they just have to wait a little bit so they can save up and maybe even use the equity they are gaining in the starter home to step up to a little bit better home in a few years. Knowledge is the key...So if you are a first time home buyer or maybe just stepping up give me a call, lets take the next step together!
"Skip, we have decided to buy a house and we want to get the best deal, so should we buy a foreclosure?"
Yes they should be considered...just a couple of things to note. Foreclosures typically are sold as is where is. This means you need to keep in mind what type of financing you are trying to use to purchase the property with. Quite a few of your lenders are going to expect the property you are purchasing to be move-in ready. Does the home have flooring? i.e. carpet, tile, etc., a stove, and lighting fixtures. Has the exterior AC unit been stolen? Are there any broken windows?
We can ask the lender to provide the missing items and to get the repairs done before closing. However, I have found in the past it is a better plan to get a loan type that will allow you to close on the property with all it defects and then get the repairs done after you close. Typically the repair costs are rolled into the price of the new loan.
If you are under a time crunch and need a short close time, a foreclosure may not suit your needs because many are now typically taking a minimum of 45 days to close. If you run into a issue it may take even longer. We are not dealing with time frames of short sales here, but they have a history of taking much longer. If you have the time and an experienced agent, I would recommend foreclosures.
In a recent article I read online from Trulia, they said according to a poll they did, the top five things a buyer wants in a Realtor are as follows.
"What do home buyers want? Recently they told us! Trulia Staff sat down with a user group and had a discussion on what they look for when hiring a real estate agent. Here’s what they had to say (in order of importance):"
1. Honesty and Credibility
Win them over with the truth! 2. Area Familiarity
Do your neighborhood homework! 3. Good Follow Through
You say it, you do it.
4. Organization
Keep it in order. 5. Good Listener
Guest Blogger: Cassy Rowe, Lead Mobile Interaction Designer at Trulia.com
As a practicing agent, I must say that is a great list. Experience has shown me that there is one more area that I would add to their list....answering the phone! Many a time I have called to set showings for my buyer clients and found that the other agent neglects to call me back. (Keep in mind also that if you're selling your home, consider how easy it will be for another agent to be able to set up a showing on your home if your agent isn't available to call to set it up.) I also have clients who call me after finding they can't get the agent on the sign to call them back. I recently had a buyer call me after they were in contact with an agent who promised to "get back with them" and never did. Keep this in mind as you are choosing an agent to work with. If you call them and they take two weeks to call you back you may want to consider changing agents. Your home is usually the largest purchase you will ever make don't you think you deserve a quick call response?
Great question. The key is get prepared BEFORE the storm is getting water in your back door. Here is a starter video as to why we need to get prepared.
Here in this forum I am including a few resources to help you "get ready". This is just meant to be a launching place, remember get prepared and stay prepared. There will be years we don't have any storms, so if you let your guard down, you will be one of the "lucky" people standing in very long lines trying to get what you should have already had!
Lets start with a few really good starter Youtube videos...
Ok so lets move to some good resources to be found on line...
This is one of the most exciting times of your life, and one of the most expensive. The questions are, where do you start, how do you get started, how fast can you get into your new home, and should you start packing now? At this point, I usually get the call..."Skip can you show us houses this afternoon?" No question--I can show you houses. The problem is, YOU may not be ready for me to show you houses. "WHAT! I just told you we are going to buy a house...what else do you need? Let's go kick some doors down!"
Hold up there, killer, we may need to do one or two things first. As we get started, we need to know what your comfort level is with price. "Man, Skip, I just don't know. I think we would like to be around $100,000. What would the monthly payment be on that?" At this point we need to bring in the expert on mortgages so we can get you pre-approved for a loan. As we move forward, this pre-approval will be critical in presenting offers to the sellers. If you want a seller to take you seriously, you must attach the approval letter with your offer. This letter also guarantees we are looking at houses in the right price range. If you think you about it, starting with a pre-approval keeps you from wasting your time looking at homes that are too high or too low. Let's just say we started out looking at homes in the $220,000 range and found one you were absolutely in love with--after which you go for the pre-approval only to find you are only approved for $175,000. Ouch! Take it from me, if you start in the higher price range and find you must come down, it will be difficult to reset your thinking to look at homes in the lower price range.
1st Quarter 2012 Florida Panhandle residential pre-foreclosure filings have more than doubled last year, as you can see from the graph above and the table below. Every county, except Escambia, had greater than 100% increase compared to last year. However, Escambia had the highest total number of filings this year at 433, followed by Bay at 428. This dramatic increase was anticipated as the government has recently struck a deal with the 5 largest private lenders to resolve some of the legal issues from previous fraudulent foreclosure filings. Hopefully, the lenders will be more willing and better equipped to do short sales and loan modifications than in the past. If there is a flood of actual foreclosures on the market, it will dramatically increase inventory and put a significant downward pressure on prices.
Extra! Extra! Read all about it! I think we have all heard that saying, but I think it may have gotten twisted around a bit in the home buying and selling arena.
If you have ever bought or sold a home, you know that the agents and their brokerages all get paid out of the commission paid by the seller at the time of closing. So that is usually two realty companies and two agents splitting that money. Here in recent years, due to the tightening of the market, I have been seeing some brokerages adding "fees" to the sellers in addition to the commission they are collecting. This is usually under the guise of an "administration fee" that is charged on every transaction above and beyond the commission they already get. The real question I have is...why? (though I think I know the real answer) Well, they will tell you that because of the all the extra work, time, and liability it takes to do their job, they need this extra "fee".
I find it odd that other companies in the same area get by without charging this extra "fee" and still manage to keep up with the work load. I also find it odd that some of these same companies also want to charge the buyers this "fee"...even when the buyers are being represented by their own agent. Is it "wrong" (legally) to tack on this fee? No! I am all for a company making a profit, so they can stay in business.
But I am also all for the free market and the power of knowledge. An informed buyer or seller is a dangerous thing to companies that overprice their product or services. You may be asking, What can I do to protect myself from this kind of thing? First, hire an agent who is honest and has a good reputation. Second, ask questions that help you understand the transaction and ALL the costs associated with that transaction. Third, listen to your agent's advice: they are in the real estate market every day, and they know what is a normal fee-- and one that is a bit out of the ordinary.
The first-time home buyer's wants vs. needs list is a tricky, or maybe I should say sticky, topic. After years of working with first-time home buyers, I have found that most seem to want to find their "forever home", you know, the one they will be raising their 2.5 children in, and then retire in, and so on. Is this really realistic in today's society? I mean, statistics show the average family moves every three to five years. Yes, I know there is someone reading this right now that is saying, "well, we have lived in our home for the past 20 years."The question is, is that the norm? And the answer is no! "So, what is the big deal Skip? I mean, what do you care if the first-time buyer buys a house that they can 'grow into'?" Well, let's just say our first-time buyers buy that big home the can "grow into"--is it going to be more or less expensive to heat and cool? Or let's talk taxes--are they going to be more or less? We could go on, but you get the point. If they buy a home that is going to fit them for the next few years, they most likely will have a lower initial purchase price and a newer home (with less maintenance) that will fit their budget. With the current market the way it is, they will also be taking advantage of historically low interest rates, coupled with competitive home prices. These two factors put together should, in a few years, equal a nice profit for them to apply to their next home.
Have you ever asked a question you already knew the answer to? As we ramp up into the new year I am once again reminded how bad surprises can be in the home buying and selling process. It seems to sound the same each time I list a home and ask the owners about the condition of the home: "Our home does not have anything wrong with it...that I know of." You see, it is not what you know that will turn around and bite you; it is the things that you don't know about that will get you every time. Knowledge is key here, and how do we get that knowledge? A home inspection! Yes, I know, the buyers will usually do their own inspection a bit after they write a contract, but do we really want to wait until that point to find out that something really needs to be fixed? Let's say you have your house listed and you decide to wait on the inspection. Lo and behold, you get a contract and the buyer's home inspection comes back with about $2000 dollars worth of things that need to be fixed...Ouch...deal falls through. Could this be avoided? YES! Listen, I know the home selling process can be expensive, so why would you throw out a tool that you could use in your favor in the selling process? If a buyer is considering two homes, and one of the two homes has a home inspection that the sellers have gone through and done all the necessary repairs according to the report, and the other home does not, which do you think the sellers will favor? Keep in mind, too, an inspection usually costs less than making a few extra mortgage payments because your contract falls through. Happy selling....
Skip, we have found the home of our dreams, and we have decided to offer 50K under what they are asking because it is a "buyers market"! Let's ask a few key questions before we go too far...
1. Are the sellers close to the true market value?
2. Do the sellers hold a mortgage that will prevent them from accepting a low offer?
3. Have the sellers done improvements to justify their price?
4. Has the seller gone through multiple price reductions, and when was the last reduction ?
5. If you were the seller, how would you react to your offer?
"Hey Skip, isn't any offer is better than no offer?"....Yes! I have heard this statement a lot with the economy like it has been in the last few years. Any agent who has some experience under their belt will tell you that AN offer is better than NO offer; just keep in mind, this is a place to get the negotiations started.
"I have been listening to the media, and they are saying the deals are better than they ever have been in years past, so I think I should come in really low and get a steal of a deal." Yes, I agree, so let's just take a scenario to illustrate my point...the sellers of the home you have fallen in love with have been reducing the price of their home with the fall of the market, and I show that to you by showing you their price drops over the time the seller has had the home listed. I, as your agent, have shown you the Current Market Analysis which reveals the sellers have the price very close, or below, it's true SOLD value. You also note that the home has a long list of upgrades like granite countertops, hardwood flooring, sprinklers, etc., and has been well-maintained, which does not seem to match the other homes you have been looking at in your price range. So now, you tell me, is the 50K under asking price offer a reasonable expectation on our part, as a potential buyer? I would say no. If you offer something that low, you should expect the seller to come back really strong on their original price, with the thought you are not a serious buyer. If you want to come in really low on an offer, one way to shore up the seller's confidence in your offer is to increase your Ernest Money Deposit or EMD, which is usually 1% or $1000, to let's say $5000, which would make the seller think you were more serious and really capable of purchasing their home. Make sure you have a proof of funds and/or a pre-qualification letter from your lender to show your ability to purchase their home. Keep in mind some of this is a mind game on our par,t and if we can stack the cards in our favor, we should. This is a wonderful time to buy with interest rates so low and the home prices really low. It has never been a better time to buy. Just keep in mind you need all the facts to really get the best deal out there!
"Skip, I am looking to buy our first home but I just don't know how this process works...Can you Help?" Wow, I am glad you asked! When you have a buyer's agent working for YOU, what you get is a partner that is going to look out for your best interests. "But, Skip, I don't think I can afford to pay you to help me...I mean, I am on a budget, and I want to get the most bang for my buck!" I agree, and that is why you need to have a full-time Realtor working just for you...so you can get the most house for your money. I mean do you want to look at foreclosures, short sales or typical owner-occupied homes? Does your mortgage allow you to get a home that may need repairs, and which repairs? What if you qualify for a reduced rate on your mortgage, and which homes will qualify for these programs? You see, you as the buyer you do not pay the agent...the seller is typically responsible for that fee. So, as a buyer, you are leaving money on the table, so to speak, by not having a professional working for you. "But what about the for-sale-by-owners, will I be missing out on them?" No, if you have a buyer's agreement with your agent, you get all the homes on the market. Plus, how do you know if you are you are getting a good deal when working with a for-sale-by-owner? I, as your agent, can help make sure you are protected. As a Realtor, I took an oath to hold my clients' best interest above my own, and I believe we, as Realtors, offer a very valuable service...This is most likely the largest asset you will own in your lifetime, GET SOME HELP! Think about it. I don't cost you anything, and have the potential of saving you thousands of dollars. How much are you willing to lose?
Ok, as you read the next sentence you have to use your radio salesman voice... "I will sell your house, or I will buy it." Sounds too good to be true? Well, probably because it is! Oh technically will they buy it, sure, but the real question is will you sell it for what they want to buy it for? Let us keep in mind you are dealing with a person who is running a business, and that person can't give money or time away or they won't be running a business for long. So what are THEY going to get out of this deal? Usually when I hear this idea being "sold" the agent will offer to sell your most prized possession and tell you "well you should list you home with me because if I don't sell it I will buy it" ...of course, at a large amount BELOW market value, using their title company, and only if you allow them to choose ALL the selling factors during the time they have your home listed... So after your home doesn't sell, what have you really agreed to? Your home will get appraised, or worse yet a Current Market Analysis done, to determine the value of your home. Then, the agent gets to knock off a certain percentage so they can resell it for a fast turn around and profit, or better yet, keep it for a rental of their own. On a side note, why would you as a seller want to give your agent any good reason not to sell your home, so they can can make money even when it doesn't sell?
